What
did NASD know and when did it know it? Regulators there didn't
need this website
to learn Asensio's darkest secret. The Murphy fraud verdict
was revealed in the New York Times on
March 11, 1998. That was almost five years before Asensio Exposed went online.

Dozens of NASD employees must have read about the verdict back then. Surely some
wondered how Asensio moved up to broker-dealer status with a quarter
million dollar verdict against him. Not to mention that it sounds like NASD may have
known about the verdict as early as 1996! If it had pursued the matter, it would have
discovered the deceits described in Part One.
That it didn't is more evidence that it prefers to see no evil.

The
"Tough Cop" Cops Out

Not following a lead is one thing. Not cooperating with Eliot Spitzer's
office is quite another. NASD's District 10 showed its true colors by
refusing to answer Spitzer's office about a reader's complaint that Asensio had fraudulently obtained his
broker-dealer license. What could be more shameful than
NASD not answering law enforcement? Read on.

When the SEC forwarded the identical complaint, District 10
realized it would have to act. Asensio's ownership of his brokerage
was transferred to others, and the name changed to Integral Securities. But the law (and NASD's by-laws) require disqualification
from the industry
for such an offense, and offenders are usually fined. District 10
let Asensio stay in the industry and didn't
fine him a penny for what looks like a decade of ill-gotten
gains. Not to mention that the ownership change appears to be a
sham.

In September, 2003, NASD also changed Asensio's file to say he no longer works
at a member firm. Asensio did give up his personal registration then. But he did not leave
his brokerage. The next month, he filed a Form BD claiming ownership of Integral
Securities. Ownership was then transferred to a trust whose owners can't
be determined, but filings current to March 15, 2005, do list him as a "control
affiliate."

Was
this another case of incompetent recordkeeping--or an intentional effort to
mislead? We'll never know. Did it matter? In January,
2004, Spitzer's staff followed up on NASD's failure to answer their
inquiry. Somehow--presumably via a phone call with District 10--they were led to
believe that NASD had removed Asensio from the industry.

Spitzer's staff relayed this information by letter to the citizen who had
complained about Asensio's license. A cover memo and
attachment advised him that Asensio's supposed exit from the industry "reflects action taken by the NASD." On receipt, the
citizen called Integral Securities. An employee confirmed that Asensio was not
only there, but still in charge. This was almost five months after NASD changed
Asensio's file to say he no longer worked at a member firm.

But
Spitzer's staff was convinced that Asensio had been removed from the
industry and declined to pursue the license fraud complaint. District 10 had saved
Asensio again. In doing so, it had duped the office of the man considered the #1crusader against Wall Street fraud.

Where is the Leadership?

Robert Glauber and
Mary Schapiro, NASD's top officials, were asked to intervene in District 10's
shenanigans more than a year ago. But there has been no visible
evidence of action to correct District 10's improper handling of the complaint
about Asensio's license. We expected better from them. Quite a few
members of the NASD leadership are attorneys--officers of the court. You'd
think false statements on sworn documents would appall them, as would District
10's failure to enforce the law and NASD's own by-laws.

We're hardly the only ones to notice NASD's
failure to enforce its own rules. Consider this
letter to the SEC about short-selling abuses written by no less than a vice-president of Charles Schwab:

The NYSE and other SROs [such as the NASD]
have had trade affirmation rules on their books for some time. However, such
rules have not been effective in changing the behavior of Buy-Side firms or
their custodians; nor do the rules provide assurance that the affirmed trade
will settle.

What he was really saying is that the
rules have not beenenforced. It brings to mind
another dark moment in Wall Street history: SEC's 1996
censure of NASD
for failing to halt rampant price-fixing on the NASDAQ. A reporter described the
mindset of NASD leaders at the time:

documents depict an organization that neglected
its oversight responsibility ... When the trading abuses came to light in
1994, the NASD viewed them as a public relations problem rather than a call for
self-examination. To the end, the NASD failed to come clean about its
problems.

NASD changed its organizational structure in
response to the censure. But the tolerance for flagrant wrongdoing that
led to the scandal seems to have survived. The question is what investors can do
about it.

Washington, We Have a Problem

The most obvious way to call NASD to account is via the
SEC. It has direct responsibility for NASD oversight.
We believe Chairman Donaldson should approach the issue as he did the hedge fund
controversy. Explaining his
decision to scrutinize that industry, he recently said:

Two
years down the pike when something blows up, and it surely
will, the SEC would be really nailed for not being on top of this.

What would be worse? A big hedge
fund blowing up--or the public finding out that the SEC had done nothing
about NASD despite evidence it had put members above the law? The
answer is obvious.

If you agree, it's time to make your voice heard.
Email the SEC Commissioners to ask that the agency investigate NASD's
enforcement program. We suggest focusing on the following issues:

* Backroom deal-making.
It's difficult to believe that Asensio has been the sole
beneficiary of District 10's rule-bending. The SEC needs to
find out the extent of its deal-making contrary to law and NASD bylaws.

* Refusing to investigate complaints. NASD
says it investigates all customer complaints.
But many complaints are about members with whom the complainant lacks a customer
relationship (e.g. market makers, research analysts). Anecdotal reports
(and our experience) suggest NASD often ignores these complaints.
The SEC needs to determine if compelling complaints are being ignored to the
benefit of wrongdoers.

* Protecting
members from law enforcement. It goes without saying that
the SEC needs to look into whether District 10 has been helping NASD members evade accountability
by government agencies.

Your email need not go into great detail--and can be as brief as
this sample if you like. If you have your own
experiences with NASD, feel free to share them with the Commissioners
(1).

No one can predict whether this effort will bear fruit. If it doesn't, we'll appeal to the
Subcommittee on
Capital Markets of the House Financial Services Committee and the
Senate Banking Committee. These are the primary committees on Capitol Hill
that conduct oversight of NASD and the SEC. But let's try to
work with the SEC first.

___________________

Update, 3/20/05

Shortly after posting the original version of this
page, we learned that a hearing panel had
barred Asensio from the securities industry for his failure to provide information requested by
the NASD staff.
Asensio has appealed the ruling, however, so it appears to be in limbo.

The ruling does not address the concerns raised on this page. We can now
report that NASD's Division of Enforcement had a complaint alleging that Asensio
may have fraudulently obtained his license more than a year before it filed the
charges brought before the hearing panel. Yet the Division ignored the
issue entirely.

Where does the ruling leave our call for an SEC
investigation of NASD? Unchanged. We're not asking the SEC to investigate Manuel Asensio. We're asking that
it investigate NASD. Logic tells us that the extraordinary protection
given to Asensio in the license fraud matter is unlikely to have been an
isolated incident.